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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 StatementSeptember 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 StatementSeptember 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: 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

Source:First National Corporation