STRASBURG, Va., April 18, 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 first quarter ended March 31, 2018. This was a $1.1 million, or 74%, increase when compared to net income of $1.5 million and earnings per share of $0.31 for the first quarter of 2017. The increase in net income resulted primarily from increases in net interest income and noninterest income.
Select highlights for the first quarter of 2018:
- Return on average equity of 18.47%
- Return on average assets of 1.45%
- Efficiency ratio improved to 62.39%
- Net interest income increased $555 thousand, or 9%
- Net loans increased $23.3 million, or 5%, compared to one year ago
- Total deposits increased $38.1 million, or 6%, compared to one year ago
- Nonperforming assets to total assets decreased to 0.09%
“We had a good start to the year with outstanding financial performance in the first quarter,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “Despite the lack of loan growth in the quarter, we were pleased with the profitability metrics. Net interest income increased 9% and was positively impacted by higher market rates. Revenue from wealth management benefited from a strong market, which translated into higher balances of assets under management. We were also pleased with the ability to control non-interest expenses to an increase of only 2% compared to the same period one year ago. The Bank plans to maintain its credit underwriting standards in spite of softening loan demand and will continue to focus on the efficiency ratio as a driver of value."
BALANCE SHEET
Total assets of First National increased $40.6 million to $767.9 million at March 31, 2018, compared to one year ago. Loans, net of the allowance for loan losses, increased $23.3 million, or 5%, and securities and interest-bearing deposits in banks increased $19.5 million, or 11%, when comparing the periods.
Total deposits increased $38.1 million, or 6%, to $692.8 million, compared to $654.8 million at March 31, 2017. When comparing the composition of the deposit portfolio at March 31, 2018 to one year ago, noninterest-bearing demand deposits increased $15.5 million, remaining at 27% of total deposits, savings and interest-bearing demand deposits increased $24.4 million, from 54% to 55% of total deposits, while time deposits decreased $1.8 million, from 19% to 18% of total deposits.
Shareholders’ equity increased $5.7 million to $59.7 million at March 31, 2018 compared to $54.0 million one year ago, primarily from an increase in retained earnings. Tangible common equity totaled $58.9 million at the end of the first quarter, compared to $52.6 million at March 31, 2017. The Company’s wholly-owned banking subsidiary, First Bank, was considered well-capitalized based on regulatory requirements at the end of the first quarter.
ANALYSIS OF THE THREE MONTH PERIOD
Net interest income increased $555 thousand, or 9%, to $6.5 million for the quarter ended March 31, 2018, compared to $6.0 million for the first quarter of 2017. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 6%, and the net interest margin increased 9 basis points to 3.79% for the quarter ended March 31, 2018, compared to 3.70% for the same period in 2017. The increase in the net interest margin resulted from a 20 basis point increase in the yield on total earning assets, which was partially offset by an 11 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. Yields increased on loans, securities, and interest-bearing deposits in banks by 24 basis points, 10 basis points, and 60 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 totaled $2.6 million, compared to $1.9 million for the same period of 2017. This was primarily a result of a $466 thousand increase in income from bank owned life insurance, a $152 thousand increase in other operating income, and a $60 thousand increase in wealth management revenue. 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 $115 thousand, or 2%, to $5.9 million for the first quarter, compared to the same period one year ago. This was attributable to a $141 thousand, or 4%, increase in salaries and employee benefits, a $33 thousand increase in occupancy expense, a $41 thousand increase in ATM and check card fees, and a $40 thousand increase in other operating expenses. The increases in salaries and employee benefits and occupancy expense 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 $27 thousand decrease in marketing expense, a $74 thousand decrease in telecommunications expense, and a $38 thousand decrease in amortization expense. The decrease in telecommunications expense resulted primarily from a refund of over-billed services in prior periods.
Income before taxes for the first quarter of 2018 increased by $1.0 million, or 47%, to $3.2 million, compared to the same period one year ago. Although income before taxes increased, income tax expense decreased by $112 thousand, or 18%, as a result 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
The provision for loan losses totaled $100 thousand for the quarter ended March 31, 2018. Net charge-offs totaled $154 thousand for the first quarter of 2018. Nonperforming assets totaled $682 thousand, or 0.09% of total assets at March 31, 2018, which was an improvement compared to $1.8 million, or 0.25% of total assets, one year ago. The allowance for loan losses totaled $5.3 million at March 31, 2018 and $5.5 million at March 31, 2017, representing 1.01% and 1.10% 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 President and CEO (540) 465-9121 | M. Shane Bell Executive Vice President and CFO (540) 465-9121 | |
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | |||||||||||||||
| Income Statement | |||||||||||||||||||
| Interest income | |||||||||||||||||||
| Interest and fees on loans | $ | 6,305 | $ | 6,365 | $ | 6,138 | $ | 5,933 | $ | 5,646 | |||||||||
| Interest on deposits in banks | 160 | 96 | 92 | 86 | 61 | ||||||||||||||
| Interest on securities | |||||||||||||||||||
| Taxable interest | 680 | 636 | 637 | 634 | 662 | ||||||||||||||
| Tax-exempt interest | 145 | 147 | 148 | 145 | 143 | ||||||||||||||
| Dividends on restricted securities | 22 | 21 | 21 | 21 | 20 | ||||||||||||||
| Total interest income | $ | 7,312 | $ | 7,265 | $ | 7,036 | $ | 6,819 | $ | 6,532 | |||||||||
| Interest expense | |||||||||||||||||||
| Interest on deposits | $ | 590 | $ | 489 | $ | 446 | $ | 405 | $ | 383 | |||||||||
| Interest on subordinated debt | 89 | 91 | 91 | 89 | 89 | ||||||||||||||
| Interest on junior subordinated debt | 86 | 80 | 79 | 76 | 68 | ||||||||||||||
| Total interest expense | $ | 765 | $ | 660 | $ | 616 | $ | 570 | $ | 540 | |||||||||
| Net interest income | $ | 6,547 | $ | 6,605 | $ | 6,420 | $ | 6,249 | $ | 5,992 | |||||||||
| Provision for loan losses | 100 | 100 | — | — | — | ||||||||||||||
| Net interest income after provision for loan losses | $ | 6,447 | $ | 6,505 | $ | 6,420 | $ | 6,249 | $ | 5,992 | |||||||||
| Noninterest income | |||||||||||||||||||
| Service charges on deposit accounts | $ | 762 | $ | 778 | $ | 760 | $ | 735 | $ | 755 | |||||||||
| ATM and check card fees | 519 | 596 | 516 | 527 | 501 | ||||||||||||||
| Wealth management fees | 407 | 386 | 359 | 355 | 347 | ||||||||||||||
| Fees for other customer services | 153 | 162 | 131 | 137 | 140 | ||||||||||||||
| Income from bank owned life insurance | 559 | 408 | 117 | 102 | 93 | ||||||||||||||
| Net gains (losses) on sales of securities | — | (114 | ) | 11 | 13 | — | |||||||||||||
| Net gains on sale of loans | 9 | 51 | 54 | 34 | 33 | ||||||||||||||
| Other operating income | 224 | 89 | 69 | 75 | 72 | ||||||||||||||
| Total noninterest income | $ | 2,633 | $ | 2,356 | $ | 2,017 | $ | 1,978 | $ | 1,941 | |||||||||
| Noninterest expense | |||||||||||||||||||
| Salaries and employee benefits | $ | 3,383 | $ | 3,338 | $ | 3,221 | $ | 3,122 | $ | 3,242 | |||||||||
| Occupancy | 400 | 388 | 379 | 348 | 367 | ||||||||||||||
| Equipment | 423 | 428 | 400 | 400 | 408 | ||||||||||||||
| Marketing | 109 | 166 | 138 | 136 | 136 | ||||||||||||||
| Supplies | 80 | 88 | 81 | 105 | 91 | ||||||||||||||
| Legal and professional fees | 191 | 228 | 216 | 245 | 197 | ||||||||||||||
| ATM and check card fees | 203 | 209 | 205 | 229 | 162 | ||||||||||||||
| FDIC assessment | 82 | 76 | 84 | 77 | 79 | ||||||||||||||
| Bank franchise tax | 115 | 111 | 111 | 110 | 104 | ||||||||||||||
| Telecommunications expense | 36 | 103 | 95 | 108 | 110 | ||||||||||||||
| Data processing expense | 162 | 165 | 153 | 152 | 150 | ||||||||||||||
| Postage expense | 61 | 14 | 62 | 74 | 61 | ||||||||||||||
| Amortization expense | 131 | 141 | 151 | 160 | 169 | ||||||||||||||
| Other real estate owned expense (income), net | (23 | ) | (192 | ) | — | 4 | 2 | ||||||||||||
| Net loss on disposal of premises and equipment | — | 252 | — | — | — | ||||||||||||||
| Other operating expense | 513 | 506 | 511 | 435 | 473 | ||||||||||||||
| Total noninterest expense | $ | 5,866 | $ | 6,021 | $ | 5,807 | $ | 5,705 | $ | 5,751 | |||||||||
| Income before income taxes | $ | 3,214 | $ | 2,840 | $ | 2,630 | $ | 2,522 | $ | 2,182 | |||||||||
| Income tax expense | 527 | 1,523 | 798 | 766 | 639 | ||||||||||||||
| Net income | $ | 2,687 | $ | 1,317 | $ | 1,832 | $ | 1,756 | $ | 1,543 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | |||||||||||||||
| Common Share and Per Common Share Data | |||||||||||||||||||
| Net income, basic | $ | 0.54 | $ | 0.27 | $ | 0.37 | $ | 0.36 | $ | 0.31 | |||||||||
| Weighted average shares, basic | 4,949,112 | 4,945,175 | 4,943,301 | 4,940,904 | 4,935,421 | ||||||||||||||
| Net income, diluted | $ | 0.54 | $ | 0.27 | $ | 0.37 | $ | 0.36 | $ | 0.31 | |||||||||
| Weighted average shares, diluted | 4,952,373 | 4,948,981 | 4,946,128 | 4,942,726 | 4,937,625 | ||||||||||||||
| Shares outstanding at period end | 4,952,575 | 4,945,702 | 4,945,056 | 4,941,604 | 4,940,766 | ||||||||||||||
| Tangible book value at period end | $ | 11.89 | $ | 11.57 | $ | 11.42 | $ | 11.08 | $ | 10.64 | |||||||||
| Cash dividends | $ | 0.05 | $ | 0.035 | $ | 0.035 | $ | 0.035 | $ | 0.035 | |||||||||
| Key Performance Ratios | |||||||||||||||||||
| Return on average assets | 1.45 | % | 0.71 | % | 1.00 | % | 0.96 | % | 0.88 | % | |||||||||
| Return on average equity | 18.47 | % | 9.01 | % | 12.78 | % | 12.79 | % | 11.78 | % | |||||||||
| Net interest margin | 3.79 | % | 3.86 | % | 3.79 | % | 3.73 | % | 3.70 | % | |||||||||
| Efficiency ratio (1) | 62.39 | % | 63.48 | % | 66.38 | % | 66.71 | % | 69.52 | % | |||||||||
| Average Balances | |||||||||||||||||||
| Average assets | $ | 751,164 | $ | 736,745 | $ | 729,651 | $ | 730,838 | $ | 714,714 | |||||||||
| Average earning assets | 704,947 | 689,338 | 681,800 | 682,132 | 667,184 | ||||||||||||||
| Average shareholders’ equity | 58,979 | 57,973 | 56,857 | 55,068 | 53,132 | ||||||||||||||
| Asset Quality | |||||||||||||||||||
| Loan charge-offs | $ | 206 | $ | 223 | $ | 243 | $ | 161 | $ | 106 | |||||||||
| Loan recoveries | 52 | 148 | 100 | 154 | 236 | ||||||||||||||
| Net charge-offs (recoveries) | 154 | 75 | 143 | 7 | (130 | ) | |||||||||||||
| Non-accrual loans | 682 | 937 | 2,121 | 1,913 | 1,596 | ||||||||||||||
| Other real estate owned, net | — | 326 | 250 | 250 | 250 | ||||||||||||||
| Nonperforming assets | 682 | 1,263 | 2,371 | 2,163 | 1,846 | ||||||||||||||
| Loans 30 to 89 days past due, accruing | 2,602 | 4,223 | 1,960 | 1,368 | 2,606 | ||||||||||||||
| Loans over 90 days past due, accruing | 773 | 183 | 89 | 151 | 119 | ||||||||||||||
| Troubled debt restructurings, accruing | 278 | 282 | 287 | 291 | 296 | ||||||||||||||
| Special mention loans | 5,365 | 5,225 | 9,677 | 10,378 | 12,896 | ||||||||||||||
| Substandard loans, accruing | 9,003 | 8,863 | 9,218 | 9,295 | 7,877 | ||||||||||||||
| Capital Ratios (2) | |||||||||||||||||||
| Total capital | $ | 69,435 | $ | 67,624 | $ | 71,318 | $ | 69,325 | $ | 67,264 | |||||||||
| Tier 1 capital | 64,163 | 62,298 | 66,017 | 63,881 | 61,813 | ||||||||||||||
| Common equity tier 1 capital | 64,163 | 62,298 | 66,017 | 63,881 | 61,813 | ||||||||||||||
| Total capital to risk-weighted assets | 13.52 | % | 13.12 | % | 13.91 | % | 13.82 | % | 13.53 | % | |||||||||
| Tier 1 capital to risk-weighted assets | 12.50 | % | 12.09 | % | 12.87 | % | 12.73 | % | 12.43 | % | |||||||||
| Common equity tier 1 capital to risk-weighted assets | 12.50 | % | 12.09 | % | 12.87 | % | 12.73 | % | 12.43 | % | |||||||||
| Leverage ratio | 8.55 | % | 8.46 | % | 9.06 | % | 8.76 | % | 8.66 | % | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | |||||||||||||||
| Balance Sheet | |||||||||||||||||||
| Cash and due from banks | $ | 11,185 | $ | 11,358 | $ | 9,162 | $ | 9,801 | $ | 10,593 | |||||||||
| Interest-bearing deposits in banks | 58,092 | 28,628 | 24,480 | 40,937 | 35,246 | ||||||||||||||
| Securities available for sale, at fair value | 93,699 | 89,255 | 93,102 | 89,741 | 91,907 | ||||||||||||||
| Securities held to maturity, at carrying value | 46,791 | 48,208 | 49,376 | 50,824 | 51,999 | ||||||||||||||
| Restricted securities, at cost | 1,590 | 1,570 | 1,570 | 1,570 | 1,570 | ||||||||||||||
| Loans held for sale | 68 | 438 | 660 | 999 | — | ||||||||||||||
| Loans, net of allowance for loan losses | 515,664 | 516,875 | 509,406 | 498,389 | 492,319 | ||||||||||||||
| Other real estate owned, net of valuation allowance | — | 326 | 250 | 250 | 250 | ||||||||||||||
| Premises and equipment, net | 19,833 | 19,891 | 20,510 | 20,501 | 20,709 | ||||||||||||||
| Accrued interest receivable | 1,869 | 1,916 | 1,886 | 1,728 | 1,753 | ||||||||||||||
| Bank owned life insurance | 13,711 | 13,967 | 14,232 | 14,115 | 14,013 | ||||||||||||||
| Core deposit intangibles, net | 799 | 930 | 1,071 | 1,222 | 1,382 | ||||||||||||||
| Other assets | 4,553 | 5,748 | 5,798 | 5,580 | 5,555 | ||||||||||||||
| Total assets | $ | 767,854 | $ | 739,110 | $ | 731,503 | $ | 735,657 | $ | 727,296 | |||||||||
| Noninterest-bearing demand deposits | $ | 189,460 | $ | 180,912 | $ | 179,351 | $ | 176,780 | $ | 173,963 | |||||||||
| Savings and interest-bearing demand deposits | 378,330 | 361,417 | 350,879 | 362,128 | 353,958 | ||||||||||||||
| Time deposits | 125,035 | 122,651 | 126,032 | 122,920 | 126,848 | ||||||||||||||
| Total deposits | $ | 692,825 | $ | 664,980 | $ | 656,262 | $ | 661,828 | $ | 654,769 | |||||||||
| Subordinated debt | 4,952 | 4,948 | 4,943 | 4,939 | 4,934 | ||||||||||||||
| Junior subordinated debt | 9,279 | 9,279 | 9,279 | 9,279 | 9,279 | ||||||||||||||
| Accrued interest payable and other liabilities | 1,105 | 1,749 | 3,485 | 3,644 | 4,336 | ||||||||||||||
| Total liabilities | $ | 708,161 | $ | 680,956 | $ | 673,969 | $ | 679,690 | $ | 673,318 | |||||||||
| Preferred stock | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
| Common stock | 6,191 | 6,182 | 6,181 | 6,177 | 6,176 | ||||||||||||||
| Surplus | 7,312 | 7,260 | 7,238 | 7,177 | 7,155 | ||||||||||||||
| Retained earnings | 48,109 | 45,670 | 44,368 | 42,709 | 41,126 | ||||||||||||||
| Accumulated other comprehensive loss, net | (1,919 | ) | (958 | ) | (253 | ) | (96 | ) | (479 | ) | |||||||||
| Total shareholders’ equity | $ | 59,693 | $ | 58,154 | $ | 57,534 | $ | 55,967 | $ | 53,978 | |||||||||
| Total liabilities and shareholders’ equity | $ | 767,854 | $ | 739,110 | $ | 731,503 | $ | 735,657 | $ | 727,296 | |||||||||
| Loan Data | |||||||||||||||||||
| Mortgage loans on real estate: | |||||||||||||||||||
| Construction and land development | $ | 33,941 | $ | 35,927 | $ | 37,182 | $ | 36,783 | $ | 36,024 | |||||||||
| Secured by farm land | 848 | 646 | 657 | 666 | 676 | ||||||||||||||
| Secured by 1-4 family residential | 208,338 | 208,177 | 203,896 | 205,114 | 205,623 | ||||||||||||||
| Other real estate loans | 221,504 | 221,610 | 221,497 | 215,076 | 215,915 | ||||||||||||||
| Loans to farmers (except those secured by real estate) | 403 | 822 | 525 | 511 | 461 | ||||||||||||||
| Commercial and industrial loans (except those secured by real estate) | 38,850 | 37,941 | 33,922 | 30,690 | 28,731 | ||||||||||||||
| Consumer installment loans | 12,140 | 12,101 | 12,047 | 9,938 | 5,279 | ||||||||||||||
| Deposit overdrafts | 222 | 232 | 196 | 245 | 199 | ||||||||||||||
| All other loans | 4,690 | 4,745 | 4,785 | 4,810 | 4,862 | ||||||||||||||
| Total loans | $ | 520,936 | $ | 522,201 | $ | 514,707 | $ | 503,833 | $ | 497,770 | |||||||||
| Allowance for loan losses | (5,272 | ) | (5,326 | ) | (5,301 | ) | (5,444 | ) | (5,451 | ) | |||||||||
| Loans, net | $ | 515,664 | $ | 516,875 | $ | 509,406 | $ | 498,389 | $ | 492,319 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | |||||||||||||||
| Reconciliation of Tax-Equivalent Net Interest Income | |||||||||||||||||||
| GAAP measures: | |||||||||||||||||||
| Interest income – loans | $ | 6,305 | $ | 6,365 | $ | 6,138 | $ | 5,933 | $ | 5,646 | |||||||||
| Interest income – investments and other | 1,007 | 900 | 898 | 886 | 886 | ||||||||||||||
| Interest expense – deposits | (590 | ) | (489 | ) | (446 | ) | (405 | ) | (383 | ) | |||||||||
| Interest expense – subordinated debt | (89 | ) | (91 | ) | (91 | ) | (89 | ) | (89 | ) | |||||||||
| Interest expense – junior subordinated debt | (86 | ) | (80 | ) | (79 | ) | (76 | ) | (68 | ) | |||||||||
| Total net interest income | $ | 6,547 | $ | 6,605 | $ | 6,420 | $ | 6,249 | $ | 5,992 | |||||||||
| Non-GAAP measures: | |||||||||||||||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 10 | $ | 17 | $ | 18 | $ | 18 | $ | 19 | |||||||||
| Tax benefit realized on non-taxable interest income – municipal securities | 39 | 76 | 76 | 74 | 74 | ||||||||||||||
| Total tax benefit realized on non-taxable interest income | $ | 49 | $ | 93 | $ | 94 | $ | 92 | $ | 93 | |||||||||
| Total tax-equivalent net interest income | $ | 6,596 | $ | 6,698 | $ | 6,514 | $ | 6,341 | $ | 6,085 | |||||||||
(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.