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Posted April 23, 2009 | Copyright © The Northern Virginia Daily
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Two local banks expand loan loss allowance in 1Q

First National Corp., Eagle Financial Services lower earnings as a result

By James Heffernan — jheffernan@nvdaily.com

Two local community banks expanded their allowance for loan losses during the first quarter, lowering their respective earnings.

First National Corp., the holding company for Strasburg-based First Bank, reported net income of $37,000 for the three months ended March 31, compared to $1.4 million in earnings for the same period in 2008.

After paying out a dividend on its preferred stock from the U.S. Treasury’s recent investment in First Bank, net income for the quarter was a loss of $7,000, effectively wiping out common-stock dividends.

The decrease in earnings was primarily due to an additional $901,000 set aside to cover losses from nonperforming, or past-due, loans — mostly in real estate — which accounted for 1.46 percent of all First Bank loans at the end of the first quarter. As of March 31, the bank’s nonperforming assets totaled $17.3 million, compared to $1.8 million on the same date a year ago.

First National President and CEO Harry S. Smith said in a statement the increase in the provision for loan losses was “prudent” given economic indicators and other factors.

“This action further prepares the Company for the possibility of an extended recession,” he said.

Berryville-based Eagle Financial Services, the holding company for Bank of Clarke County, fared slightly better, with first-quarter earnings of $955,000, down from $1.7 million for the same three months in 2008.

Eagle Financial increased its provision for loan losses by $600,000 during the quarter, and its year-over-year nonperforming assets jumped from $1.5 million to $6.9 million.

Also during the quarter, Bank of Clarke County foreclosed on real estate assets totaling $422,000, and the value of its loans more than 90 days past due increased from $624,000 as of March 31, 2008, to $1.6 million at the end of last month.

Bank of Clarke has chosen not to accept Treasury funds.

In a statement, Johnny Milleson, president and CEO of Eagle Financial, said the first quarter was a challenging time for all banks, but Bank of Clarke remains strong in the key areas of earnings, liquidity, deposit growth and capital.

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