First National Corp., the parent company of First Bank, reported record annual and quarterly earnings. Net income totaled $10 million, or $1.85 per basic and diluted share, for the year ended Dec. 31, 2013. For the fourth quarter of 2013, net income totaled $7.5 million, or $1.49 per basic and diluted share.
“We are pleased to announce record earnings for the year and the fourth quarter,” said Scott Harvard, president and chief executive officer of the company and the bank. “Thanks to the hard work of our entire team, the financial condition of the bank has improved to the point that we were able to reverse the valuation allowance on deferred tax assets, resulting in a boost to fourth quarter and annual earnings of $4.8 million.”
Fourth quarter earnings
Net income totaled $7.5 million for the fourth quarter of 2013, compared to $943,000 for the same period of 2012. The significant increase in earnings was primarily a result of the reversal of the valuation allowance on net deferred tax assets, which decreased income tax expense by $4.8 million. In addition, the company recorded a recovery of loan losses totaling $3.0 million, compared to provision for loan losses of $100,000 for the same quarter of 2012. Return on average assets was 5.65 percent compared to 0.72 percent for the fourth quarter of 2012. Return on average equity was 64.03 percent for the fourth quarter of 2013, compared to 8.37 percent for the fourth quarter of 2012.
Net interest income totaled $4.5 million for the quarter, compared to $4.7 million for the same period one year ago. Noninterest income increased $182,000, or 11 percent, compared to the same period of 2012, primarily from a 17 percent increase in service charges on deposits and a 25 percent increase in wealth management fee income.
Noninterest expense totaled $6.0 million for the quarter compared to $5.1 million for the same period in the prior year. Noninterest expense, excluding lease termination costs of $655,000 and pension settlement costs of $284,000, was unchanged at $5.1 million for the fourth quarter of 2013, compared to the same quarter in 2012. Other operating expenses increased $760,000, compared to the same period of 2012, primarily from the decision to terminate a land lease, initially executed for branch expansion, which impacted current year earnings and eliminated expense in future periods. Salaries and employee benefits increased $503,000 compared to the same period of 2012, primarily as a result of higher pension costs related to the retirement of several long-time employees with years of service ranging up to 40 years. The reversal of the valuation allowance on net deferred tax assets resulted in income tax benefits totaling $4.3 million for the fourth quarter of 2013, compared to income tax expense of $76,000 in the same period of 2012.
Pre-provision pre-tax earnings, excluding non-recurring items, increased 9 percent to $1.2 million for the quarter, compared to $1.1 million for the same period in the prior year. Lease termination costs of $655,000 and pension settlement costs of $284,000 comprised the non-recurring items for the fourth quarter of 2013.
Annual earnings
Net income totaled $10.0 million for year ended December 31, 2013, compared to $2.8 million for the same period one year ago. Return on average assets was 1.87 percent and return on average equity was 22.16 percent for the year ended December 31, 2013, compared to 0.53 percent and 6.80 percent, respectively, for the same period in 2012.
Net interest income totaled $18.4 million compared to $19.3 million for 2012. Noninterest income totaled $6.9 million for 2013 compared to $7.2 million for 2012. Noninterest income, excluding a gain on termination of a director retirement plan of $543,000 in 2013, and gains on sale of securities of $1.3 million in 2012, increased 8 percent to $6.4 million, compared to $5.9 million for the same period one year ago. The increase was primarily driven by wealth management fees and revenues from bank-owned life insurance.
Noninterest expense totaled $20.6 million for the year, compared to $19.1 million for the prior year. Noninterest expense, excluding lease termination costs of $864,000 and pension settlement costs of $284,000, increased 1 percent to $19.4 million for the year ended December 31, 2013, compared to $19.1 million for the same period in 2012. Salaries and employee benefits, including pension expense, increased $836,000compared to the prior year. Other operating expenses increased $905,000 compared to the same period one year ago. This increase was primarily attributable to the bank's decision to terminate two land leases, initially executed for branch expansion, which impacted current year earnings and eliminated expense in future periods. Income tax benefit totaled $4.8 million for the year ended December 31, 2013, compared to income tax expense of $965,000 for the prior year, primarily as a result of the reversal of the valuation allowance on the company's net deferred tax assets.
Pre-provision pre-tax earnings, excluding non-recurring items and gains on sale of securities, totaled $5.4 million for the year compared to $6.0 million for the prior year. Lease termination costs of $864,000, pension settlement costs of $284,000, and a gain on termination of a director retirement plan totaling $543,000 comprised the non-recurring items for 2013. Gains on sale of securities totaled $1.3 million in 2012.