First National Corporation (the “Company”) (OTCQB: FXNC), the parent company of First Bank (the “Bank”), reported annual and quarterly earnings.
Net income totaled $7.6 million and net income available to common shareholders totaled $6.5 million, or $1.32 per basic and diluted share, for the year ended December 31, 2014. For the fourth quarter, net income totaled $3.7 million and net income available to common shareholders totaled $3.4 million, or $0.68 per basic and diluted share.
Operating Highlights for 2014
- Return on average assets was 1.45%
- Net interest margin was 3.86%
- Four consecutive quarters of loan growth
- Service charge revenue increased 17% to $2.6 million
- Wealth management revenue increased 13% to $1.9 million
- Non-performing assets decreased by 33%
- Expanded into Harrisonburg and Staunton with mortgage division and loan production offices Entered into an agreement to acquire six branch banking offices in Virginia
- Book value per common share increased from $7.96 to $9.17
“We are proud of the Company’s financial performance and expansion progress during 2014. Our bankers generated four consecutive quarters of loan growth, improved the Bank’s net interest margin, maintained strong noninterest income and improved asset quality while entering new markets and launching a new mortgage division,” said Scott C. Harvard, President and CEO of the Company and the Bank. Harvard continued, “We look forward to further expansion and growth of the Bank with the planned acquisition of six bank offices located throughout the Shenandoah Valley and Central Virginia.”
Fourth Quarter Earnings
Net income totaled $3.7 million for the fourth quarter of 2014 compared to $7.4 million for the same period of 2013, which included a $4.8 million favorable impact to the income tax provision from elimination of the valuation allowance on net deferred tax assets. The return on average assets was 2.81% for the quarter compared to 5.55% for the same quarter one year ago, and the return on average equity was 25.03% compared to 62.96%.
Net interest income increased $256 thousand to $4.8 million for the fourth quarter, compared to $4.5 million for the same period one year ago, and the net interest margin was 3.96% compared to 3.68%. Noninterest income totaled $2.4 million for the fourth quarter, which was a $678 thousand, or 38% increase compared to the same quarter one year ago. The increase was primarily attributable to net gains on sale of securities of $765 thousand during the fourth quarter of 2014. Revenues from wealth management, service charges on deposits, and ATM and check card fees were relatively stable when compared to the same period one year ago.
Noninterest expenses totaled $4.9 million for the fourth quarter, which was a $1.4 million, or 22% decrease compared to the same period one year ago. The decrease in expenses was mostly attributable to salaries and employee benefit costs that decreased $185 thousand, FDIC assessments that decreased $104 thousand and expenses from other real estate owned that decreased $531 thousand during the fourth quarter of 2014. The decrease in expenses was also attributable to non-recurring items in the fourth quarter of 2013, which included $655 thousand of costs related to a lease termination.
The Bank recorded a recovery of loan losses totaling $3.2 million during the quarter, which resulted in a total allowance for loan losses of $6.7 million or 1.77% of total loans at December 31, 2014. The recovery was primarily a result of a decrease in the general allocation from an improvement in the historical loss experience and improved asset quality. The recovery of loan losses totaled $3.0 million and the allowance for loan losses totaled $10.6 million, or 2.98% of total loans, at December 31, 2013.
Annual Earnings
Net income totaled $7.6 million for the year ended December 31, 2014, compared to $9.9 million for the same period one year ago. The return on average assets was 1.45% compared to 1.85% for the same period one year ago, and the return on average equity was 13.49% compared to 21.87%.
Net interest income totaled $18.6 million for the period, compared to $18.4 million for the same period one year ago, and the net interest margin was 3.86% compared to 3.72%. Noninterest income totaled $7.4 million, which was a $513 thousand or 7% increase compared to $6.9 million for the prior year. The increase in noninterest income was mostly attributable to revenue from service charges on deposits that was $368 thousand or 17% higher, and revenue from the wealth management division that was $219 thousand or 13% higher than the prior year.
Noninterest expenses decreased $2.0 million, or 9%, to $18.8 million for the year compared to $20.8 million for the prior year. The decrease was attributable to expenses from other real estate owned, which decreased by $1.3 million and FDIC assessments that decreased by $430 thousand. The decrease in noninterest expenses was also attributable to non-recurring items in 2013, including lease termination costs totaling $864 thousand. These decreases in expenses were partially offset by increases in bank franchise tax, marketing, and data processing.
The Bank recorded a recovery of loan losses totaling $3.9 million for the year, compared to a recovery of loan losses totaling $425 thousand for the prior year. The recovery was primarily a result of a decrease in the general allocation from an improvement in the historical loss experience and improved asset quality.
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