First National Corporation announces fourth quarter, full year 2016 results

First National Corporation today reported net income available to common shareholders of $1.7 million and earnings per share of $0.34 for the fourth quarter ended December 31, 2016.

This was an $862,000 increase when compared to earnings for the fourth quarter of 2015, which totaled $813,000 or $0.17 per share. The increase in net income available to common shareholders resulted primarily from an $867,000 decrease in noninterest expenses, a $315,000 increase in net interest income and a $128,000 decrease in the effective dividend on preferred stock.

These changes were offset by a $377,000 increase in income tax expense and a $71,000 decrease in noninterest income.

For the year ended December 31, 2016, net income available to common shareholders totaled $5.9 million or $1.20 per share. This was an increase of $4.4 million compared to earnings for the prior year, which totaled $1.5 million or $0.31 per share. The increase in earnings resulted primarily from a $2.5 million increase in net interest income, a $2.1 million decrease in noninterest expenses, a $151 thousand increase in noninterest income and a $1.1 million decrease in the effective dividend on preferred stock. These changes were offset by a $1.4 million increase in income tax expense.

Select highlights for the fourth quarter include:

• Return on equity increased to 13.08%, compared to 7.01% for fourth quarter of 2015 Net income available to common shareholders increased $862 thousand, or 106%, compared to the fourth quarter of 2015
• The efficiency ratio improved to 67.17%, compared to 78.42% for the fourth quarter of 2015
• Noninterest expense decreased for the sixth consecutive quarter, and decreased $867 thousand, or 13%, compared to the fourth quarter of 2015
• Assets per employee increased to $4.5 million, compared to $3.6 million at the end of the fourth quarter of 2015
• Net interest income increased $315 thousand, or 6%, compared to the fourth quarter of 2015
• Net loans increased $15.5 million during the quarter, and increased $47.3 million, or 11%, over the prior year
• Noninterest‐bearing demand deposits increased $11.0 million, or 7%, over the prior year.

“Since closing on the branch deposit acquisition in the second quarter of 2015, our banking team has successfully executed on two primary drivers of value of the transaction,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “The first driver was to deploy the newly acquired funds into loans. Loans, net of the allowance for loan losses, increased by $47.3 million during 2016, which followed total loan growth of $61.8 million in 2015. The second primary driver was to gain efficiencies from the larger balance sheet. For the year ended December 31, 2015, the year of the acquisition, the efficiency ratio was 80.92%. Our team was able to improve the efficiency ratio to 71.08% for the year ended December 31, 2016 by reducing non‐interest expenses $2.1 million and by increasing revenues $2.7 million. Productivity improved with total assets per employee increasing 25% from $3.6 million to $4.5 million during the year as a result of right sizing our branch network, reducing staffing, and doing more with less by utilizing technology and improving processes.”