Exhibit 99.1
fxnclogoa06.jpg

First National Corporation Announces 46% Increase in Third Quarter Net Income

STRASBURG, Va., October 24, 2018 --- First National Corporation (the “Company” or “First National”) (OTC: FXNC) today reported net income of $2.7 million and earnings per share of $0.54 for the third quarter ended September 30, 2018. This was an $844 thousand, or 46%, increase when compared to net income of $1.8 million and earnings per share of $0.37 for the third quarter of 2017. The increase in net income resulted primarily from a $663 thousand, or 10%, increase in net interest income.

Select highlights for the third quarter of 2018:

Return on average equity of 16.89%
Return on average assets of 1.41%
Net interest income increased $663 thousand, or 10%
Net loans increased $25.6 million, or 5%, compared to one year ago
Net interest margin of 4.02%
Efficiency ratio of 62.68%

“We were delighted with the Company’s third quarter financial performance,” said Scott C. Harvard, president and chief executive officer of First National. Harvard added, “Moderate loan growth for the period and rising interest rates helped drive the increase in net income over the second quarter of 2018 and third quarter of 2017. We continue to remain disciplined in our loan underwriting at this point in the economic cycle while working hard to deepen existing relationships with our best customers. The company’s profitability ratios were excellent and compared favorably to prior periods thanks to a continued focus on efficiency and customer service.”

BALANCE SHEET

Total assets of First National increased $15.0 million to $746.5 million at September 30, 2018, compared to one year ago. The earning asset composition changed favorably as loans, net of the allowance for loan losses, increased $25.6 million, or 5%, while securities and interest-bearing deposits in banks decreased $9.9 million, or 6%, when comparing the periods.

Total deposits increased $10.8 million, or 2%, to $667.1 million, compared to $656.3 million one year ago. The deposit portfolio composition also changed favorably as noninterest-bearing deposits increased $6.9 million, or 4%, savings and interest-bearing deposits increased $10.1 million, and time deposits decreased $6.2 million. Noninterest-bearing deposits increased to 28% of total deposits compared to 27% one year ago.

Shareholders’ equity increased $6.1 million to $63.7 million, compared to $57.5 million one year ago from retained earnings. Tangible common equity increased $6.6 million, or 12%, to $63.1 million, compared to $56.5 million at September 30, 2017. The Company’s wholly-owned banking subsidiary, First Bank, was considered well-capitalized based on regulatory requirements at the end of the quarter.

ANALYSIS OF THE THREE-MONTH PERIOD

Net interest income increased $663 thousand, or 10%, to $7.1 million, compared to $6.4 million for the same period in 2017. The increase resulted from a higher net interest margin and higher average earning assets. Average earning assets increased 3%, and the net interest margin increased 23 basis points to 4.02%, compared to 3.79% for the same period in 2017. The increase in the net interest margin resulted from a 38 basis point increase in the yield on total earning assets, which was partially offset by a 15 basis point increase in interest expense as a percent of average earning assets.

The higher yield on earning assets was attributable to an increase in yields on loans, securities, and interest-bearing deposits in banks, which all benefited from increases in market rates. Yields increased on loans, securities, and interest-bearing deposits in banks by 33 basis points, 26 basis points, and 84 basis points, respectively.






The increase in interest expense as a percent of average earning assets was primarily attributable to higher interest rates paid on interest-bearing deposits, with the largest impact coming from a 49 basis point increase in the cost of money market accounts, when comparing the periods.

Noninterest income increased $161 thousand, or 8%, to $2.2 million, compared to $2.0 million for the same period of 2017. Wealth management revenue increased $64 thousand, or 18%, and service charges on deposits increased $58 thousand, or 8%, compared to the same period one year ago.

Noninterest expense increased $143 thousand, or 2%, to $6.0 million, compared to $5.8 million for the same period one year ago. This was primarily attributable to a $150 thousand, or 5%, increase in salaries and employee benefits and a $40 thousand increase in other operating expenses. The increases in salaries and employee benefits resulted primarily from the expansion of the Company's banking subsidiary, First Bank, into the Richmond, Virginia market during the fourth quarter of 2017. The increases in expenses were partially offset by a $43 thousand decrease in amortization expense.

Income before taxes increased by $681 thousand, or 26%, to $3.3 million, compared to the same period one year ago. Although income before taxes increased, income tax expense decreased by $163 thousand because of the new 21% federal corporate income tax rate established by the Tax Cuts and Jobs Act enacted in December 2017.

ANALYSIS OF THE NINE MONTH PERIOD

Net interest income increased $1.8 million, or 10%, to $20.5 million, compared to $18.7 million for the same period in 2017. The increase resulted from a higher net interest margin and higher average earning assets. Average earning assets increased 5%, and the net interest margin increased 15 basis points to 3.89%, compared to 3.74% for the same period in 2017. The increase in the net interest margin resulted from a 29 basis point increase in the yield on total earning assets, which was partially offset by a 14 basis point increase in interest expense as a percent of average earning assets.

The higher yield on earning assets was attributable to an increase in yields on loans, securities, and interest-bearing deposits in banks, which all benefited from increases in market rates. Yields increased on loans, securities, and interest-bearing deposits in banks by 28 basis points, 20 basis points, and 64 basis points, respectively.

The increase in interest expense as a percent of average earning assets was primarily attributable to higher interest rates paid on interest-bearing deposits, with the largest impact coming from a 51 basis point increase in the cost of money market accounts, when comparing the periods.

Noninterest income increased $942 thousand, or 16%, to $6.9 million, compared to $5.9 million for the same period of 2017. This was primarily a result of a $431 thousand increase in income from bank owned life insurance, a $178 thousand increase in wealth management revenue, and a $192 thousand increase in other operating income. The increase in income from bank owned life insurance was attributable to a $469 thousand life insurance benefit recorded during the first quarter of 2018. The increase in other operating income was primarily attributable to the termination of the pension plan and the subsequent distribution of plan assets, which increased other operating income by $126 thousand.

Noninterest expense increased $417 thousand, or 2%, to $17.7 million, compared to $17.3 million for the same period one year ago. This was primarily attributable to a $396 thousand, or 4%, increase in salaries and employee benefits, an $80 thousand increase in occupancy expense, and a $177 thousand increase in other operating expenses. The increases in salaries and employee benefits and occupancy resulted primarily from the expansion of First Bank into the Richmond market during the fourth quarter of 2017. The increases in expenses were partially offset by a $96 thousand decrease in
telecommunications expense and a $121 thousand decrease in amortization expense. Telecommunication expense decreased primarily from a refund received in the first quarter of 2018 from over-billed services in prior periods.

Income before taxes increased by $2.2 million, or 30%, to $9.6 million, compared to the same period one year ago. Although income before taxes increased, income tax expense decreased by $458 thousand because of the new 21% federal corporate income tax rate established by the Tax Cuts and Jobs Act enacted in December 2017.






ASSET QUALITY/LOAN LOSS PROVISION

There was no provision for loan losses for the three months ended September 30, 2018 and 2017. Net charge-offs totaled $238 thousand compared to $143 thousand for the same period one year ago.

The provision for loan losses totaled $100 thousand for the nine months ended September 30, 2018, compared to no provision for loan losses for the same period one year ago. Net charge-offs totaled $625 thousand for the nine months ended September 30, 2018, compared to net charge-offs of $20 thousand for the same period one year ago.

Nonperforming assets totaled $2.7 million, or 0.37% of total assets at September 30, 2018, compared to $2.4 million, or 0.32% of total assets, one year ago. The allowance for loan losses totaled $4.8 million at September 30, 2018 and $5.3 million at September 30, 2017, representing 0.89% and 1.03% of total loans, respectively.

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, 2017, and other filings with the Securities and Exchange Commission.

ABOUT FIRST NATIONAL CORPORATION

First National Corporation (OTC: 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 15 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.

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,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
Income Statement
 
 
 
 
 
 
 
 
 
Interest income
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
6,917

 
$
6,546

 
$
6,305

 
$
6,365

 
$
6,138

Interest on deposits in banks
88

 
186

 
160

 
96

 
92

Interest on securities
 
 
 
 
 
 
 
 
 
Taxable interest
797

 
776

 
680

 
636

 
637

Tax-exempt interest
156

 
156

 
145

 
147

 
148

Dividends on restricted securities
23

 
22

 
22

 
21

 
21

Total interest income
$
7,981

 
$
7,686

 
$
7,312

 
$
7,265

 
$
7,036

Interest expense
 
 
 
 
 
 
 
 
 
Interest on deposits
$
702

 
$
665

 
$
590

 
$
489

 
$
446

Interest on subordinated debt
91

 
89

 
89

 
91

 
91

Interest on junior subordinated debt
105

 
101

 
86

 
80

 
79

Total interest expense
$
898

 
$
855

 
$
765

 
$
660

 
$
616

Net interest income
$
7,083

 
$
6,831

 
$
6,547

 
$
6,605

 
$
6,420

Provision for loan losses

 

 
100

 
100

 

Net interest income after provision for loan losses
$
7,083

 
$
6,831

 
$
6,447

 
$
6,505

 
$
6,420

Noninterest income
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
$
818

 
$
784

 
$
762

 
$
778

 
$
760

ATM and check card fees
540

 
555

 
519

 
596

 
516

Wealth management fees
423

 
409

 
407

 
386

 
359

Fees for other customer services
143

 
151

 
153

 
162

 
131

Income from bank owned life insurance
107

 
77

 
559

 
408

 
117

Net gains (losses) on securities

 

 

 
(114
)
 
11

Net gains on sale of loans
39

 
15

 
9

 
51

 
54

Other operating income
108

 
76

 
224

 
89

 
69

Total noninterest income
$
2,178

 
$
2,067

 
$
2,633

 
$
2,356

 
$
2,017

Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
$
3,371

 
$
3,227

 
$
3,383

 
$
3,338

 
$
3,221

Occupancy
387

 
387

 
400

 
388

 
379

Equipment
396

 
420

 
423

 
428

 
400

Marketing
123

 
161

 
109

 
166

 
138

Supplies
75

 
88

 
80

 
88

 
81

Legal and professional fees
229

 
223

 
191

 
228

 
216

ATM and check card expense
217

 
211

 
203

 
209

 
205

FDIC assessment
78

 
66

 
82

 
76

 
84

Bank franchise tax
118

 
118

 
115

 
111

 
111

Telecommunications expense
83

 
98

 
36

 
103

 
95

Data processing expense
168

 
170

 
162

 
165

 
153

Postage expense
42

 
42

 
61

 
14

 
62

Amortization expense
108

 
120

 
131

 
141

 
151

Other real estate owned expense (income), net
2

 
1

 
(23
)
 
(192
)
 

Net loss on disposal of premises and equipment
2

 

 

 
252

 

Other operating expense
551

 
532

 
513

 
506

 
511

Total noninterest expense
$
5,950

 
$
5,864

 
$
5,866

 
$
6,021

 
$
5,807

Income before income taxes
$
3,311

 
$
3,034

 
$
3,214

 
$
2,840

 
$
2,630

Income tax expense
635

 
583

 
527

 
1,523

 
798

Net income
$
2,676

 
$
2,451

 
$
2,687

 
$
1,317

 
$
1,832






FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
 
(unaudited)
For the Quarter Ended
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
Common Share and Per Common Share Data
 
 
 
 
 
 
 
 
 
Net income, basic
$
0.54

 
$
0.49

 
$
0.54

 
$
0.27

 
$
0.37

Weighted average shares, basic
4,955,162

 
4,952,712

 
4,949,112

 
4,945,175

 
4,943,301

Net income, diluted
$
0.54

 
$
0.49

 
$
0.54

 
$
0.27

 
$
0.37

Weighted average shares, diluted
4,958,162

 
4,954,265

 
4,952,373

 
4,948,981

 
4,946,128

Shares outstanding at period end
4,956,925

 
4,953,356

 
4,952,575

 
4,945,702

 
4,945,056

Tangible book value at period end
$
12.72

 
$
12.31

 
$
11.89

 
$
11.57

 
$
11.42

Cash dividends
$
0.05

 
$
0.05

 
$
0.05

 
$
0.035

 
$
0.035

 
 
 
 
 
 
 
 
 
 
Key Performance Ratios
 
 
 
 
 
 
 
 
 
Return on average assets
1.41
%
 
1.29
%
 
1.45
%
 
0.71
%
 
1.00
%
Return on average equity
16.89
%
 
16.23
%
 
18.47
%
 
9.01
%
 
12.78
%
Net interest margin
4.02
%
 
3.86
%
 
3.79
%
 
3.86
%
 
3.79
%
Efficiency ratio (1)
62.68
%
 
64.17
%
 
62.39
%
 
63.48
%
 
66.38
%
 
 
 
 
 
 
 
 
 
 
Average Balances
 
 
 
 
 
 
 
 
 
Average assets
$
750,619

 
$
762,626

 
$
751,164

 
$
736,745

 
$
729,651

Average earning assets
703,894

 
715,163

 
704,947

 
689,338

 
681,800

Average shareholders’ equity
62,882

 
60,592

 
58,979

 
57,973

 
56,857

 
 
 
 
 
 
 
 
 
 
Asset Quality
 
 
 
 
 
 
 
 
 
Loan charge-offs
$
295

 
$
294

 
$
206

 
$
223

 
$
243

Loan recoveries
57

 
61

 
52

 
148

 
100

Net charge-offs
238

 
233

 
154

 
75

 
143

Non-accrual loans
2,738

 
2,330

 
682

 
937

 
2,121

Other real estate owned, net

 
68

 

 
326

 
250

Nonperforming assets
2,738

 
2,398

 
682

 
1,263

 
2,371

Loans 30 to 89 days past due, accruing
2,707

 
3,408

 
2,602

 
4,223

 
1,960

Loans over 90 days past due, accruing
261

 
549

 
773

 
183

 
89

Troubled debt restructurings, accruing
269

 
273

 
278

 
282

 
287

Special mention loans
2,718

 
3,988

 
5,365

 
5,225

 
9,677

Substandard loans, accruing
1,216

 
3,798

 
9,003

 
8,863

 
9,218

 
 
 
 
 
 
 
 
 
 
Capital Ratios (2)
 
 
 
 
 
 
 
 
 
Total capital
$
72,807

 
$
71,026

 
$
69,435

 
$
67,624

 
$
71,318

Tier 1 capital
68,006

 
65,987

 
64,163

 
62,298

 
66,017

Common equity tier 1 capital
68,006

 
65,987

 
64,163

 
62,298

 
66,017

Total capital to risk-weighted assets
13.20
%
 
13.47
%
 
13.52
%
 
13.12
%
 
13.91
%
Tier 1 capital to risk-weighted assets
12.33
%
 
12.52
%
 
12.50
%
 
12.09
%
 
12.87
%
Common equity tier 1 capital to risk-weighted assets
12.33
%
 
12.52
%
 
12.50
%
 
12.09
%
 
12.87
%
Leverage ratio
9.07
%
 
8.66
%
 
8.55
%
 
8.46
%
 
9.06
%





FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
 
(unaudited)
For the Quarter Ended
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
Balance Sheet
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
11,370

 
$
13,501

 
$
11,185

 
$
11,358

 
$
9,162

Interest-bearing deposits in banks
10,068

 
27,762

 
58,092

 
28,628

 
24,480

Securities available for sale, at fair value
102,748

 
106,707

 
93,699

 
89,255

 
93,102

Securities held to maturity, at carrying value
44,239

 
45,701

 
46,791

 
48,208

 
49,376

Restricted securities, at cost
1,590

 
1,590

 
1,590

 
1,570

 
1,570

Loans held for sale
516

 
1,195

 
68

 
438

 
660

Loans, net of allowance for loan losses
535,020

 
525,894

 
515,664

 
516,875

 
509,406

Other real estate owned, net of valuation allowance

 
68

 

 
326

 
250

Premises and equipment, net
19,557

 
19,633

 
19,833

 
19,891

 
20,510

Accrued interest receivable
2,138

 
2,073

 
1,869

 
1,916

 
1,886

Bank owned life insurance
13,894

 
13,787

 
13,711

 
13,967

 
14,232

Core deposit intangibles, net
571

 
679

 
799

 
930

 
1,071

Other assets
4,743

 
4,774

 
4,553

 
5,748

 
5,798

Total assets
$
746,454

 
$
763,364

 
$
767,854

 
$
739,110

 
$
731,503

 
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand deposits
$
186,293

 
$
196,839

 
$
189,460

 
$
180,912

 
$
179,351

Savings and interest-bearing demand deposits
360,988

 
367,399

 
378,330

 
361,417

 
350,879

Time deposits
119,823

 
122,291

 
125,035

 
122,651

 
126,032

Total deposits
$
667,104

 
$
686,529

 
$
692,825

 
$
664,980

 
$
656,262

Subordinated debt
4,961

 
4,956

 
4,952

 
4,948

 
4,943

Junior subordinated debt
9,279

 
9,279

 
9,279

 
9,279

 
9,279

Accrued interest payable and other liabilities
1,459

 
952

 
1,105

 
1,749

 
3,485

Total liabilities
$
682,803

 
$
701,716

 
$
708,161

 
$
680,956

 
$
673,969

 
 
 
 
 
 
 
 
 
 
Preferred stock
$

 
$

 
$

 
$

 
$

Common stock
6,196

 
6,192

 
6,191

 
6,182

 
6,181

Surplus
7,438

 
7,346

 
7,312

 
7,260

 
7,238

Retained earnings
52,741

 
50,313

 
48,109

 
45,670

 
44,368

Accumulated other comprehensive loss, net
(2,724
)
 
(2,203
)
 
(1,919
)
 
(958
)
 
(253
)
Total shareholders’ equity
$
63,651

 
$
61,648

 
$
59,693

 
$
58,154

 
$
57,534

Total liabilities and shareholders’ equity
$
746,454

 
$
763,364

 
$
767,854

 
$
739,110

 
$
731,503

 
 
 
 
 
 
 
 
 
 
Loan Data
 
 
 
 
 
 
 
 
 
Mortgage loans on real estate:
 
 
 
 
 
 
 
 
 
Construction and land development
$
42,982

 
$
37,350

 
$
33,941

 
$
35,927

 
$
37,182

Secured by farm land
942

 
975

 
848

 
646

 
657

Secured by 1-4 family residential
211,938

 
211,101

 
208,338

 
208,177

 
203,896

Other real estate loans
223,961

 
223,387

 
221,504

 
221,610

 
221,497

Loans to farmers (except those secured by real estate)
937

 
476

 
403

 
822

 
525

Commercial and industrial loans (except those secured by real estate)
41,924

 
40,467

 
38,850

 
37,941

 
33,922

Consumer installment loans
12,301

 
12,315

 
12,140

 
12,101

 
12,047

Deposit overdrafts
249

 
231

 
222

 
232

 
196

All other loans
4,587

 
4,631

 
4,690

 
4,745

 
4,785

Total loans
$
539,821

 
$
530,933

 
$
520,936

 
$
522,201

 
$
514,707

Allowance for loan losses
(4,801
)
 
(5,039
)
 
(5,272
)
 
(5,326
)
 
(5,301
)
Loans, net
$
535,020

 
$
525,894

 
$
515,664

 
$
516,875

 
$
509,406

 





FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
 
(unaudited)
For the Quarter Ended
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
Reconciliation of Tax-Equivalent Net Interest Income
 
 
 
 
 
 
 
 
GAAP measures:
 
 
 
 
 
 
 
 
 
Interest income – loans
$
6,917

 
$
6,546

 
$
6,305

 
$
6,365

 
$
6,138

Interest income – investments and other
1,064

 
1,140

 
1,007

 
900

 
898

Interest expense – deposits
(702
)
 
(665
)
 
(590
)
 
(489
)
 
(446
)
Interest expense – subordinated debt
(91
)
 
(89
)
 
(89
)
 
(91
)
 
(91
)
Interest expense – junior subordinated debt
(105
)
 
(101
)
 
(86
)
 
(80
)
 
(79
)
Total net interest income
$
7,083

 
$
6,831

 
$
6,547

 
$
6,605

 
$
6,420

Non-GAAP measures:
 
 
 
 
 
 
 
 
 
Tax benefit realized on non-taxable interest income – loans
$
12

 
$
11

 
$
10

 
$
17

 
$
18

Tax benefit realized on non-taxable interest income – municipal securities
41

 
41

 
39

 
76

 
76

Total tax benefit realized on non-taxable interest income
$
53

 
$
52

 
$
49

 
$
93

 
$
94

Total tax-equivalent net interest income
$
7,136

 
$
6,883

 
$
6,596

 
$
6,698

 
$
6,514






FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
 
(unaudited)
For the Nine Months Ended
 
September 30,
2018
 
September 30,
2017
Income Statement
 
 
 
Interest income
 
 
 
Interest and fees on loans
$
19,768

 
$
17,717

Interest on deposits in banks
434

 
239

Interest on securities
 
 
 
Taxable interest
2,253

 
1,933

Tax-exempt interest
457

 
436

Dividends on restricted securities
67

 
62

Total interest income
$
22,979

 
$
20,387

Interest expense
 
 
 
Interest on deposits
$
1,957

 
$
1,234

Interest on subordinated debt
269

 
269

Interest on junior subordinated debt
292

 
223

Total interest expense
$
2,518

 
$
1,726

Net interest income
$
20,461

 
$
18,661

Provision for loan losses
100

 

Net interest income after provision for loan losses
$
20,361

 
$
18,661

Noninterest income
 
 
 
Service charges on deposit accounts
$
2,364

 
$
2,250

ATM and check card fees
1,614

 
1,544

Wealth management fees
1,239

 
1,061

Fees for other customer services
447

 
408

Income from bank owned life insurance
743

 
312

Net gains (losses) on securities

 
24

Net gains on sale of loans
63

 
121

Other operating income
408

 
216

Total noninterest income
$
6,878

 
$
5,936

Noninterest expense
 
 
 
Salaries and employee benefits
$
9,981

 
$
9,585

Occupancy
1,174

 
1,094

Equipment
1,239

 
1,208

Marketing
393

 
410

Supplies
243

 
277

Legal and professional fees
643

 
658

ATM and check card expense
631

 
596

FDIC assessment
226

 
240

Bank franchise tax
351

 
325

Telecommunications expense
217

 
313

Data processing expense
500

 
455

Postage expense
145

 
197

Amortization expense
359

 
480

Other real estate owned expense (income), net
(20
)
 
6

Net loss on disposal of premises and equipment
2

 

Other operating expense
1,596

 
1,419

Total noninterest expense
$
17,680

 
$
17,263

Income before income taxes
$
9,559

 
$
7,334

Income tax expense
1,745

 
2,203

Net income
$
7,814

 
$
5,131







FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)     
 
(unaudited)
For the Nine Months Ended
 
September 30, 2018
 
September 30, 2017
Common Share and Per Common Share Data
 
 
 
Net income, basic
$
1.58

 
$
1.04

Weighted average shares, basic
4,952,351

 
4,939,905

Net income, diluted
$
1.58

 
$
1.04

Weighted average shares, diluted
4,954,955

 
4,942,189

Shares outstanding at period end
4,956,925

 
4,945,056

Tangible book value at period end
$
12.72

 
$
11.42

Cash dividends
$
0.15

 
$
0.105

 
 
 
 
Key Performance Ratios
 
 
 
Return on average assets
1.38
%
 
0.95
%
Return on average equity
17.17
%
 
12.47
%
Net interest margin
3.89
%
 
3.74
%
Efficiency ratio (1)
63.07
%
 
67.51
%
 
 
 
 
Average Balances
 
 
 
Average assets
$
754,856

 
$
725,106

Average earning assets
707,998

 
677,092

Average shareholders’ equity
60,848

 
55,029

 
 
 
 
Asset Quality
 
 
 
Loan charge-offs
$
795

 
$
510

Loan recoveries
170

 
490

Net charge-offs (recoveries)
625

 
20

 
 
 
 
Reconciliation of Tax-Equivalent Net Interest Income
 
 
GAAP measures:
 
 
 
Interest income – loans
$
19,768

 
$
17,717

Interest income – investments and other
3,211

 
2,670

Interest expense – deposits
(1,957
)
 
(1,234
)
Interest expense – subordinated debt
(269
)
 
(269
)
Interest expense – junior subordinated debt
(292
)
 
(223
)
Total net interest income
$
20,461

 
$
18,661

Non-GAAP measures:
 
 
 
Tax benefit realized on non-taxable interest income – loans
$
33

 
$
55

Tax benefit realized on non-taxable interest income – municipal securities
121

 
224

Total tax benefit realized on non-taxable interest income
$
154

 
$
279

Total tax-equivalent net interest income
$
20,615

 
$
18,940









(1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned income/expense, amortization of intangibles, and gains and losses 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. 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% for 2018 and 34% for 2017. See the tables above for tax-equivalent net interest income and reconciliations 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 First Bank.





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