First National (FXNC) - 2022 Q1 - Quarterly Report

Financial Performance - Net income for Q1 2022 increased by $1.3 million to $3.7 million, or $0.60 per diluted share, compared to $2.4 million, or $0.50 per diluted share, in Q1 2021[125]. - Total net interest income for the three months ended March 31, 2022, was $10,548 thousand, compared to $7,512 thousand for the same period in 2021, representing an increase of 40.4%[140]. - Tax-equivalent net interest income for the three months ended March 31, 2022, was $10,637 thousand, up from $7,568 thousand in the prior year, reflecting a growth of 40.4%[140]. - For the three-month period ending March 31, 2022, net interest income increased by $3.0 million, or 40%, compared to the same period of 2021, driven by a $2.9 million, or 36%, increase in total interest and dividend income[170]. - Noninterest income rose by $568 thousand, or 27%, to $2.7 million, with wealth management fees increasing by $160 thousand, or 25%[178]. Expenses and Efficiency - Total noninterest expense increased by $2.0 million, or 30%, largely due to the acquisition of The Bank of Fincastle and SmartBank's loan portfolio[126][130]. - The efficiency ratio for Q1 2022 was 64.38%, slightly improved from 64.49% in Q1 2021, indicating stable operational efficiency[138]. - Noninterest expense increased by $2.0 million, or 30%, to $8.6 million, primarily due to a $1.6 million, or 44%, increase in salaries and employee benefits[180]. Loan Losses and Allowances - The allowance for loan losses totaled $5.8 million, or 0.70% of total loans, with no provision for loan losses recorded in Q1 2022[128]. - The allowance for loan losses at March 31, 2022, included $350 thousand attributable to purchased loans[149]. - The company evaluates the allowance for loan losses quarterly, considering factors such as trends in delinquencies and charge-offs, and current economic conditions[146]. - The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors, calculated over the preceding twelve quarters[148]. - The allowance for loan losses was $5.8 million, representing 0.70% of total loans as of March 31, 2022[205]. Acquisitions and Growth - The acquisition of The Bank of Fincastle was completed for $33.8 million, with total assets of $267.9 million, total loans of $194.5 million, and total deposits of $236.3 million at the time of acquisition[133]. - First Bank acquired $82.0 million of loans and fixed assets from SmartBank for $83.7 million, transitioning an experienced team of bankers to First Bank[135]. - The acquisition of The Bank of Fincastle on July 1, 2021, contributed to the growth in average earning assets and overall financial performance[170]. Assets and Liabilities - Total assets increased by $28.2 million to $1.4 billion as of March 31, 2022, primarily due to an $11.2 million (1.4%) increase in loans and a $48.2 million (144.1%) increase in securities held to maturity[183]. - Total liabilities rose by $38.7 million to $1.3 billion, mainly driven by a $44.1 million increase in savings and interest-bearing demand deposits[184]. - Total shareholders' equity decreased by $10.5 million to $106.6 million, primarily due to a $13.7 million decrease in accumulated other comprehensive income[185]. - Loans, net of allowance for loan losses, increased by $11.2 million to $830.6 million, with commercial real estate loans rising by $19.4 million[186]. Credit Quality and Risk Management - Non-performing assets totaled $3.9 million, representing approximately 0.27% of total assets as of March 31, 2022[202]. - Impaired loans totaled $2.1 million as of March 31, 2022, with no related allowance for loan losses recorded[207]. - The Company had $1.6 million in loans classified as troubled debt restructurings (TDRs) as of March 31, 2022[200]. - Other potential problem loans totaled $311 thousand as of March 31, 2022, down from $1.1 million at December 31, 2021[203]. - The company performs regular credit reviews of the loan portfolio to ensure adherence to underwriting standards and assess credit quality[145]. Securities and Deposits - As of March 31, 2022, the securities portfolio totaled $366.5 million, an increase of $43.6 million, or 14.0%, from $322.9 million at December 31, 2021[211]. - The available for sale securities amounted to $284.9 million, while held to maturity securities were $81.6 million, compared to $289.5 million and $33.4 million at December 31, 2021, respectively[212]. - Deposits increased to $1.3 billion, up by $44.1 million from $1.2 billion at December 31, 2021, with noninterest-bearing demand deposits at 32% of total deposits[213]. Capital and Commitments - The Bank's total capital to risk-weighted assets ratio was 14.44% as of March 31, 2022, indicating strong capital adequacy[220]. - The Bank met the requirements to qualify as "well capitalized" with a common equity Tier 1 capital ratio of 13.79%[220]. - Commitments to extend credit amounted to $167.1 million at March 31, 2022, compared to $161.4 million at December 31, 2021[227]. - The Company has $10.9 million in locked-rate commitments to originate mortgage loans as of March 31, 2022[230]. Cash Flow and Hedges - At March 31, 2022, cash and liquid assets totaled $235.3 million, with 9.8% or $81.7 million of the loan portfolio maturing within one year[216]. - The cash flow hedges related to interest rate swaps had a fair value of $1.6 million at March 31, 2022[232]. - The Company has not authorized another stock repurchase plan as of March 31, 2022, following the suspension of the previous plan[223].