First National Corporation Announces 46% Increase in Third Quarter Net Income

STRASBURG, Va., Oct. 24, 2018 (GLOBE NEWSWIRE) — First National Corporation (the “Company” or “First National”) (OTC: FXNC) today reported net income of $2.7 million and earnings per share of $0.54 for the third quarter ended September 30, 2018. This was an $844 thousand, or 46%, increase when compared to net income of $1.8 million and earnings per share of $0.37 for the third quarter of 2017. The increase in net income resulted primarily from a $663 thousand, or 10%, increase in net interest income.

Select highlights for the third quarter of 2018:

  • Return on average equity of 16.89%
  • Return on average assets of 1.41%
  • Net interest income increased $663 thousand, or 10%
  • Net loans increased $25.6 million, or 5%, compared to one year ago
  • Net interest margin of 4.02%
  • Efficiency ratio of 62.68%

“We were delighted with the Company’s third quarter financial performance,” said Scott C. Harvard, president and chief executive officer of First National.  Harvard added, “Moderate loan growth for the period and rising interest rates helped drive the increase in net income over the second quarter of 2018 and third quarter of 2017. We continue to remain disciplined in our loan underwriting at this point in the economic cycle while working hard to deepen existing relationships with our best customers. The company’s profitability ratios were excellent and compared favorably to prior periods thanks to a continued focus on efficiency and customer service.”

BALANCE SHEET

Total assets of First National increased $15.0 million to $746.5 million at September 30, 2018, compared to one year ago.  The earning asset composition changed favorably as loans, net of the allowance for loan losses, increased $25.6 million, or 5%, while securities and interest-bearing deposits in banks decreased $9.9 million, or 6%, when comparing the periods.

Total deposits increased $10.8 million, or 2%, to $667.1 million, compared to $656.3 million one year ago.  The deposit portfolio composition also changed favorably as noninterest-bearing deposits increased $6.9 million, or 4%, savings and interest-bearing deposits increased $10.1 million, and time deposits decreased $6.2 million.  Noninterest-bearing deposits increased to 28% of total deposits compared to 27% one year ago.

Shareholders’ equity increased $6.1 million to $63.7 million, compared to $57.5 million one year ago from retained earnings. Tangible common equity increased $6.6 million, or 12%, to $63.1 million, compared to $56.5 million at September 30, 2017. The Company’s wholly-owned banking subsidiary, First Bank, was considered well-capitalized based on regulatory requirements at the end of the quarter.

ANALYSIS OF THE THREE-MONTH PERIOD

Net interest income increased $663 thousand, or 10%, to $7.1 million, compared to $6.4 million for the same period in 2017. The increase resulted from a higher net interest margin and higher average earning assets. Average earning assets increased 3%, and the net interest margin increased 23 basis points to 4.02%, compared to 3.79% for the same period in 2017. The increase in the net interest margin resulted from a 38 basis point increase in the yield on total earning assets, which was partially offset by a 15 basis point increase in interest expense as a percent of average earning assets.

The higher yield on earning assets was attributable to an increase in yields on loans, securities, and interest-bearing deposits in banks, which all benefited from increases in market rates. Yields increased on loans, securities, and interest-bearing deposits in banks by 33 basis points, 26 basis points, and 84 basis points, respectively.

The increase in interest expense as a percent of average earning assets was primarily attributable to higher interest rates paid on interest-bearing deposits, with the largest impact coming from a 49 basis point increase in the cost of money market accounts, when comparing the periods.

Noninterest income increased $161 thousand, or 8%, to $2.2 million, compared to $2.0 million for the same period of 2017. Wealth management revenue increased $64 thousand, or 18%, and service charges on deposits increased $58 thousand, or 8%, compared to the same period one year ago.

Noninterest expense increased $143 thousand, or 2%, to $6.0 million, compared to $5.8 million for the same period one year ago. This was primarily attributable to a $150 thousand, or 5%, increase in salaries and employee benefits and a $40 thousand increase in other operating expenses. The increases in salaries and employee benefits resulted primarily from the expansion of the Company’s banking subsidiary, First Bank, into the Richmond, Virginia market during the fourth quarter of 2017. The increases in expenses were partially offset by a $43 thousand decrease in amortization expense.

Income before taxes increased by $681 thousand, or 26%, to $3.3 million, compared to the same period one year ago. Although income before taxes increased, income tax expense decreased by $163 thousand because of the new 21% federal corporate income tax rate established by the Tax Cuts and Jobs Act enacted in December 2017.

ANALYSIS OF THE NINE MONTH PERIOD

Net interest income increased $1.8 million, or 10%, to $20.5 million, compared to $18.7 million for the same period in 2017. The increase resulted from a higher net interest margin and higher average earning assets. Average earning assets increased 5%, and the net interest margin increased 15 basis points to 3.89%, compared to 3.74% for the same period in 2017. The increase in the net interest margin resulted from a 29 basis point increase in the yield on total earning assets, which was partially offset by a 14 basis point increase in interest expense as a percent of average earning assets.

The higher yield on earning assets was attributable to an increase in yields on loans, securities, and interest-bearing deposits in banks, which all benefited from increases in market rates. Yields increased on loans, securities, and interest-bearing deposits in banks by 28 basis points, 20 basis points, and 64 basis points, respectively.

The increase in interest expense as a percent of average earning assets was primarily attributable to higher interest rates paid on interest-bearing deposits, with the largest impact coming from a 51 basis point increase in the cost of money market accounts, when comparing the periods.

Noninterest income increased $942 thousand, or 16%, to $6.9 million, compared to $5.9 million for the same period of 2017. This was primarily a result of a $431 thousand increase in income from bank owned life insurance, a $178 thousand increase in wealth management revenue, and a $192 thousand increase in other operating income. The increase in income from bank owned life insurance was attributable to a $469 thousand life insurance benefit recorded during the first quarter of 2018. The increase in other operating income was primarily attributable to the termination of the pension plan and the subsequent distribution of plan assets, which increased other operating income by $126 thousand.

Noninterest expense increased $417 thousand, or 2%, to $17.7 million, compared to $17.3 million for the same period one year ago. This was primarily attributable to a $396 thousand, or 4%, increase in salaries and employee benefits, an $80 thousand increase in occupancy expense, and a $177 thousand increase in other operating expenses. The increases in salaries and employee benefits and occupancy resulted primarily from the expansion of First Bank into the Richmond market during the fourth quarter of 2017. The increases in expenses were partially offset by a $96 thousand decrease in telecommunications expense and a $121 thousand decrease in amortization expense. Telecommunication expense decreased primarily from a refund received in the first quarter of 2018 from over-billed services in prior periods.

Income before taxes increased by $2.2 million, or 30%, to $9.6 million, compared to the same period one year ago. Although income before taxes increased, income tax expense decreased by $458 thousand because of the new 21% federal corporate income tax rate established by the Tax Cuts and Jobs Act enacted in December 2017.

ASSET QUALITY/LOAN LOSS PROVISION

There was no provision for loan losses for the three months ended September 30, 2018 and 2017.  Net charge-offs totaled $238 thousand compared to $143 thousand for the same period one year ago.

The provision for loan losses totaled $100 thousand for the nine months ended September 30, 2018, compared to no provision for loan losses for the same period one year ago.  Net charge-offs totaled $625 thousand for the nine months ended September 30, 2018, compared to net charge-offs of $20 thousand for the same period one year ago.

Nonperforming assets totaled $2.7 million, or 0.37% of total assets at September 30, 2018, compared to $2.4 million, or 0.32% of total assets, one year ago. The allowance for loan losses totaled $4.8 million at September 30, 2018 and $5.3 million at September 30, 2017, representing 0.89% and 1.03% of total loans, respectively.

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, 2017, and other filings with the Securities and Exchange Commission.

ABOUT FIRST NATIONAL CORPORATION

First National Corporation (OTC: FXNC) is the parent company and bank holding company of First Bank, a community bank that first opened for business in 1907 in Strasburg, Virginia. The Bank offers loan and deposit products and services through its website, www.fbvirginia.com, its mobile banking platform, a network of ATMs located throughout its market area, a loan production office, a customer service center in a retirement community, and 15 bank branch office locations located throughout the Shenandoah Valley and central regions of Virginia. In addition to providing traditional banking services, the Bank operates 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.

CONTACTS

Scott C. Harvard                                                                                                                               M. Shane Bell
President and CEO                                                                                                                           Executive Vice President and CFO
(540) 465-9121                                                                                                                                 (540) 465-9121
[email protected]                                                                                                                  [email protected]

FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)

  (unaudited)
For the Quarter Ended
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
Income Statement                  
Interest income                  
Interest and fees on loans $ 6,917     $ 6,546     $ 6,305     $ 6,365     $ 6,138  
Interest on deposits in banks 88     186     160     96     92  
Interest on securities                  
Taxable interest 797     776     680     636     637  
Tax-exempt interest 156     156     145     147     148  
Dividends on restricted securities 23     22     22     21     21  
Total interest income $ 7,981     $ 7,686     $ 7,312     $ 7,265     $ 7,036  
Interest expense                  
Interest on deposits $ 702     $ 665     $ 590     $ 489     $ 446  
Interest on subordinated debt 91     89     89     91     91  
Interest on junior subordinated debt 105     101     86     80     79  
Total interest expense $ 898     $ 855     $ 765     $ 660     $ 616  
Net interest income $ 7,083     $ 6,831     $ 6,547     $ 6,605     $ 6,420  
Provision for loan losses         100     100      
Net interest income after provision for loan losses $ 7,083     $ 6,831     $ 6,447     $ 6,505     $ 6,420  
Noninterest income                  
Service charges on deposit accounts $ 818     $ 784     $ 762     $ 778     $ 760  
ATM and check card fees 540     555     519     596     516  
Wealth management fees 423     409     407     386     359  
Fees for other customer services 143     151     153     162     131  
Income from bank owned life insurance 107     77     559     408     117  
Net gains (losses) on securities             (114 )   11  
Net gains on sale of loans 39     15     9     51     54  
Other operating income 108     76     224     89     69  
Total noninterest income $ 2,178     $ 2,067     $ 2,633     $ 2,356     $ 2,017  
Noninterest expense                  
Salaries and employee benefits $ 3,371     $ 3,227     $ 3,383     $ 3,338     $ 3,221  
Occupancy 387     387     400     388     379  
Equipment 396     420     423     428     400  
Marketing 123     161     109     166     138  
Supplies 75     88     80     88     81  
Legal and professional fees 229     223     191     228     216  
ATM and check card expense 217     211     203     209     205  
FDIC assessment 78     66     82     76     84  
Bank franchise tax 118     118     115     111     111  
Telecommunications expense 83     98     36     103     95  
Data processing expense 168     170     162     165     153  
Postage expense 42     42     61     14     62  
Amortization expense 108     120     131     141     151  
Other real estate owned expense (income), net 2     1     (23 )   (192 )    
Net loss on disposal of premises and equipment 2             252      
Other operating expense 551     532     513     506     511  
Total noninterest expense $ 5,950     $ 5,864     $ 5,866     $ 6,021     $ 5,807  
Income before income taxes $ 3,311     $ 3,034     $ 3,214     $ 2,840     $ 2,630  
Income tax expense 635     583     527     1,523     798  
Net income $ 2,676     $ 2,451     $ 2,687     $ 1,317     $ 1,832  
 


FIRST NATIONAL CORPORATION

Quarterly Performance Summary
(in thousands, except share and per share data)

  (unaudited)
For the Quarter Ended
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
Common Share and Per Common Share Data                  
Net income, basic $ 0.54     $ 0.49     $ 0.54     $ 0.27     $ 0.37  
Weighted average shares, basic 4,955,162     4,952,712     4,949,112     4,945,175     4,943,301  
Net income, diluted $ 0.54     $ 0.49     $ 0.54     $ 0.27     $ 0.37  
Weighted average shares, diluted 4,958,162     4,954,265     4,952,373     4,948,981     4,946,128  
Shares outstanding at period end 4,956,925     4,953,356     4,952,575     4,945,702     4,945,056  
Tangible book value at period end $ 12.72     $ 12.31     $ 11.89     $ 11.57     $ 11.42  
Cash dividends $ 0.05     $ 0.05     $ 0.05     $ 0.035     $ 0.035  
                   
Key Performance Ratios                  
Return on average assets 1.41 %   1.29 %   1.45 %   0.71 %   1.00 %
Return on average equity 16.89 %   16.23 %   18.47 %   9.01 %   12.78 %
Net interest margin 4.02 %   3.86 %   3.79 %   3.86 %   3.79 %
Efficiency ratio (1) 62.68 %   64.17 %   62.39 %   63.48 %   66.38 %
                   
Average Balances                  
Average assets $ 750,619     $ 762,626     $ 751,164     $ 736,745     $ 729,651  
Average earning assets 703,894     715,163     704,947     689,338     681,800  
Average shareholders’ equity 62,882     60,592     58,979     57,973     56,857  
                   
Asset Quality                  
Loan charge-offs $ 295     $ 294     $ 206     $ 223     $ 243  
Loan recoveries 57     61     52     148     100  
Net charge-offs 238     233     154     75     143  
Non-accrual loans 2,738     2,330     682     937     2,121  
Other real estate owned, net     68         326     250  
Nonperforming assets 2,738     2,398     682     1,263     2,371  
Loans 30 to 89 days past due, accruing 2,707     3,408     2,602     4,223     1,960  
Loans over 90 days past due, accruing 261     549     773     183     89  
Troubled debt restructurings, accruing 269     273     278     282     287  
Special mention loans 2,718     3,988     5,365     5,225     9,677  
Substandard loans, accruing 1,216     3,798     9,003     8,863     9,218  
                   
Capital Ratios (2)                  
Total capital $ 72,807     $ 71,026     $ 69,435     $ 67,624     $ 71,318  
Tier 1 capital 68,006     65,987     64,163     62,298     66,017  
Common equity tier 1 capital 68,006     65,987     64,163     62,298     66,017  
Total capital to risk-weighted assets 13.20 %   13.47 %   13.52 %   13.12 %   13.91 %
Tier 1 capital to risk-weighted assets 12.33 %   12.52 %   12.50 %   12.09 %   12.87 %
Common equity tier 1 capital to risk-weighted assets 12.33 %   12.52 %   12.50 %   12.09 %   12.87 %
Leverage ratio 9.07 %   8.66 %   8.55 %   8.46 %   9.06 %
                             


FIRST NATIONAL CORPORATION

Quarterly Performance Summary
(in thousands, except share and per share data)

  (unaudited)
For the Quarter Ended
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
Balance Sheet                  
Cash and due from banks $ 11,370     $ 13,501     $ 11,185     $ 11,358     $ 9,162  
Interest-bearing deposits in banks 10,068     27,762     58,092     28,628     24,480  
Securities available for sale, at fair value 102,748     106,707     93,699     89,255     93,102  
Securities held to maturity, at carrying value 44,239     45,701     46,791     48,208     49,376  
Restricted securities, at cost 1,590     1,590     1,590     1,570     1,570  
Loans held for sale 516     1,195     68     438     660  
Loans, net of allowance for loan losses 535,020     525,894     515,664     516,875     509,406  
Other real estate owned, net of valuation allowance     68         326     250  
Premises and equipment, net 19,557     19,633     19,833     19,891     20,510  
Accrued interest receivable 2,138     2,073     1,869     1,916     1,886  
Bank owned life insurance 13,894     13,787     13,711     13,967     14,232  
Core deposit intangibles, net 571     679     799     930     1,071  
Other assets 4,743     4,774     4,553     5,748     5,798  
Total assets $ 746,454     $ 763,364     $ 767,854     $ 739,110     $ 731,503  
                   
Noninterest-bearing demand deposits $ 186,293     $ 196,839     $ 189,460     $ 180,912     $ 179,351  
Savings and interest-bearing demand deposits 360,988     367,399     378,330     361,417     350,879  
Time deposits 119,823     122,291     125,035     122,651     126,032  
Total deposits $ 667,104     $ 686,529     $ 692,825     $ 664,980     $ 656,262  
Subordinated debt 4,961     4,956     4,952     4,948     4,943  
Junior subordinated debt 9,279     9,279     9,279     9,279     9,279  
Accrued interest payable and other liabilities 1,459     952     1,105     1,749     3,485  
Total liabilities $ 682,803     $ 701,716     $ 708,161     $ 680,956     $ 673,969  
                   
Preferred stock $     $     $     $     $  
Common stock 6,196     6,192     6,191     6,182     6,181  
Surplus 7,438     7,346     7,312     7,260     7,238  
Retained earnings 52,741     50,313     48,109     45,670     44,368  
Accumulated other comprehensive loss, net (2,724 )   (2,203 )   (1,919 )   (958 )   (253 )
Total shareholders’ equity $ 63,651     $ 61,648     $ 59,693     $ 58,154     $ 57,534  
Total liabilities and shareholders’ equity $ 746,454     $ 763,364     $ 767,854     $ 739,110     $ 731,503  
                   
Loan Data                  
Mortgage loans on real estate:                  
Construction and land development $ 42,982     $ 37,350     $ 33,941     $ 35,927     $ 37,182  
Secured by farm land 942     975     848     646     657  
Secured by 1-4 family residential 211,938     211,101     208,338     208,177     203,896  
Other real estate loans 223,961     223,387     221,504     221,610     221,497  
Loans to farmers (except those secured by real estate) 937     476     403     822     525  
Commercial and industrial loans (except those secured by real estate) 41,924     40,467     38,850     37,941     33,922  
Consumer installment loans 12,301     12,315     12,140     12,101     12,047  
Deposit overdrafts 249     231     222     232     196  
All other loans 4,587     4,631     4,690     4,745     4,785  
Total loans $ 539,821     $ 530,933     $ 520,936     $ 522,201     $ 514,707  
Allowance for loan losses (4,801 )   (5,039 )   (5,272 )   (5,326 )   (5,301 )
Loans, net $ 535,020     $ 525,894     $ 515,664     $ 516,875     $ 509,406  
 


FIRST NATIONAL CORPORATION

Quarterly Performance Summary
(in thousands, except share and per share data)

  (unaudited)
For the Quarter Ended
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
Reconciliation of Tax-Equivalent Net Interest Income                
GAAP measures:                  
Interest income – loans $ 6,917     $ 6,546     $ 6,305     $ 6,365     $ 6,138  
Interest income – investments and other 1,064     1,140     1,007     900     898  
Interest expense – deposits (702 )   (665 )   (590 )   (489 )   (446 )
Interest expense – subordinated debt (91 )   (89 )   (89 )   (91 )   (91 )
Interest expense – junior subordinated debt (105 )   (101 )   (86 )   (80 )   (79 )
Total net interest income $ 7,083     $ 6,831     $ 6,547     $ 6,605     $ 6,420  
Non-GAAP measures:                  
Tax benefit realized on non-taxable interest income – loans $ 12     $ 11     $ 10     $ 17     $ 18  
Tax benefit realized on non-taxable interest income – municipal securities 41     41     39     76     76  
Total tax benefit realized on non-taxable interest income $ 53     $ 52     $ 49     $ 93     $ 94  
Total tax-equivalent net interest income $ 7,136     $ 6,883     $ 6,596     $ 6,698     $ 6,514  
 


FIRST NATIONAL CORPORATION

Year-to-Date Performance Summary
(in thousands, except share and per share data)

  (unaudited)
For the Nine Months Ended
  September 30,
2018
  September 30,
2017
Income Statement      
Interest income      
Interest and fees on loans $ 19,768     $ 17,717  
Interest on deposits in banks 434     239  
Interest on securities      
Taxable interest 2,253     1,933  
Tax-exempt interest 457     436  
Dividends on restricted securities 67     62  
Total interest income $ 22,979     $ 20,387  
Interest expense      
Interest on deposits $ 1,957     $ 1,234  
Interest on subordinated debt 269     269  
Interest on junior subordinated debt 292     223  
Total interest expense $ 2,518     $ 1,726  
Net interest income $ 20,461     $ 18,661  
Provision for loan losses 100      
Net interest income after provision for loan losses $ 20,361     $ 18,661  
Noninterest income      
Service charges on deposit accounts $ 2,364     $ 2,250  
ATM and check card fees 1,614     1,544  
Wealth management fees 1,239     1,061  
Fees for other customer services 447     408  
Income from bank owned life insurance 743     312  
Net gains (losses) on securities     24  
Net gains on sale of loans 63     121  
Other operating income 408     216  
Total noninterest income $ 6,878     $ 5,936  
Noninterest expense      
Salaries and employee benefits $ 9,981     $ 9,585  
Occupancy 1,174     1,094  
Equipment 1,239     1,208  
Marketing 393     410  
Supplies 243     277  
Legal and professional fees 643     658  
ATM and check card expense 631     596  
FDIC assessment 226     240  
Bank franchise tax 351     325  
Telecommunications expense 217     313  
Data processing expense 500     455  
Postage expense 145     197  
Amortization expense 359     480  
Other real estate owned expense (income), net (20 )   6  
Net loss on disposal of premises and equipment 2      
Other operating expense 1,596     1,419  
Total noninterest expense $ 17,680     $ 17,263  
Income before income taxes $ 9,559     $ 7,334  
Income tax expense 1,745     2,203  
Net income $ 7,814     $ 5,131  
 


FIRST NATIONAL CORPORATION

Year-to-Date Performance Summary
(in thousands, except share and per share data)        

  (unaudited)
For the Nine Months Ended
  September 30, 2018   September 30, 2017
Common Share and Per Common Share Data      
Net income, basic $ 1.58     $ 1.04  
Weighted average shares, basic 4,952,351     4,939,905  
Net income, diluted $ 1.58     $ 1.04  
Weighted average shares, diluted 4,954,955     4,942,189  
Shares outstanding at period end 4,956,925     4,945,056  
Tangible book value at period end $ 12.72     $ 11.42  
Cash dividends $ 0.15     $ 0.105  
       
Key Performance Ratios      
Return on average assets 1.38 %   0.95 %
Return on average equity 17.17 %   12.47 %
Net interest margin 3.89 %   3.74 %
Efficiency ratio (1) 63.07 %   67.51 %
       
Average Balances      
Average assets $ 754,856     $ 725,106  
Average earning assets 707,998     677,092  
Average shareholders’ equity 60,848     55,029  
       
Asset Quality      
Loan charge-offs $ 795     $ 510  
Loan recoveries 170     490  
Net charge-offs (recoveries) 625     20  
       
Reconciliation of Tax-Equivalent Net Interest Income    
GAAP measures:      
Interest income – loans $ 19,768     $ 17,717  
Interest income – investments and other 3,211     2,670  
Interest expense – deposits (1,957 )   (1,234 )
Interest expense – subordinated debt (269 )   (269 )
Interest expense – junior subordinated debt (292 )   (223 )
Total net interest income $ 20,461     $ 18,661  
Non-GAAP measures:      
Tax benefit realized on non-taxable interest income – loans $ 33     $ 55  
Tax benefit realized on non-taxable interest income – municipal securities 121     224  
Total tax benefit realized on non-taxable interest income $ 154     $ 279  
Total tax-equivalent net interest income $ 20,615     $ 18,940  

(1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned income/expense, amortization of intangibles, and gains and losses 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.  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 21% for 2018 and 34% for 2017. See the tables above for tax-equivalent net interest income and reconciliations 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 First Bank.