First National (FXNC) - 2022 Q4 - Annual Report

Financial Performance - Net income increased by $6.4 million to $16.8 million, or $2.68 per diluted share, for the year ended December 31, 2022, compared to $10.4 million, or $1.86 per diluted share, for the same period in 2021[159]. - Net interest income increased by $10.7 million, or 31%, for the year ended December 31, 2022, driven by a $12.3 million increase in total interest income[162]. - Noninterest income rose by $2.4 million, primarily from a $2.9 million gain recognized from the sale of an interest in a company owned by First Bank Financial Services, Inc.[165]. - Return on average assets was 1.19% and return on average equity was 15.87% for the year ended December 31, 2022, compared to 0.88% and 10.30%, respectively, for the year ended December 31, 2021[160]. - The efficiency ratio improved to 61.75% in 2022 from 64.44% in 2021, indicating enhanced operational efficiency[175]. Asset and Liability Management - Total assets decreased to $1,369.4 million as of December 31, 2022, from $1,389.4 million in 2021[168]. - Total liabilities decreased by $11.4 million to $1.3 billion at December 31, 2022, with total deposits decreasing by $7.4 million[220]. - Total shareholders' equity decreased by $8.6 million to $108.4 million at December 31, 2022, mainly due to a $22.8 million decrease in accumulated other comprehensive income[221]. - As of December 31, 2022, total deposits amounted to $1.2 billion, a slight decrease of $7.4 million from the previous year[254]. Loan Performance - The provision for loan losses increased by $2.5 million, resulting in a total allowance for loan losses of $7.4 million, or 0.81% of total loans, at December 31, 2022[164]. - Loans increased by $95.4 million to $920.5 million at December 31, 2022, with residential real estate loans increasing by $39.4 million[225]. - Non-performing assets totaled $2.9 million at December 31, 2022, representing approximately 0.21% of total assets[229]. - The allowance for loan losses increased to $7.4 million at December 31, 2022, representing 0.81% of total loans, up from 0.69% in the prior year[235]. - The Bank modified loans totaling $9.1 million at December 31, 2022, all in the commercial real estate loan portfolio, which were performing under modified terms[234]. Interest Income and Expense - Interest income from loans increased to $41,720,000 in 2022 from $32,797,000 in 2021, representing a growth of 27.5%[177]. - Total net interest income rose to $45,575,000 in 2022 compared to $34,840,000 in 2021, marking an increase of 30.9%[177]. - Total interest income rose by $12.3 million, or 33%, driven by a $212.0 million, or 19%, increase in average earning assets[206]. - Total interest expense increased by $1.5 million, or 66%, due to a $141.8 million, or 19%, increase in average interest-bearing liabilities[206]. Capital Management - The Company authorized a stock repurchase plan of up to $5.0 million, with no shares repurchased during the year ended December 31, 2022[281]. - Common equity Tier 1 capital increased to $132,103 million in 2022 from $120,224 million in 2021, reflecting a growth of approximately 9.8%[277]. - Total risk-based capital rose to $139,549 million in 2022, up from $125,934 million in 2021, indicating an increase of about 10.9%[277]. - The common equity Tier 1 capital ratio decreased to 13.82% in 2022 from 14.09% in 2021, while the total capital ratio also fell to 14.60% from 14.76%[277]. Regulatory Compliance - The Bank's regulatory capital ratios met all requirements, including a common equity Tier 1 capital ratio of 7.0%[275]. - First Bank remained well-capitalized as of December 31, 2022, meeting all regulatory capital requirements[285]. Risk Management - The Company manages risks associated with third-party lending programs through minimum credit scores and robust performance analysis[202]. - The Board Loan Committee reviews all loans greater than $1.0 million and meets at least twice per quarter to oversee risk management[191]. - The Bank's loan policy includes approval limits for individual loan officers based on their position and experience to manage risk effectively[191].